Greetings, and welcome to GAN's Q4 Fiscal Year Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr.

Robert Shore, VP of Investor Relations and Capital Markets. Please go ahead, sir..

Thank you, Hector. And good afternoon, everyone. GAN's fourth quarter and full year 2021 earnings release was issued today after the market closed and is posted on the company's website at gan.com.

Please note that results are unaudited and preliminary and certain prior quarter results were adjusted in connection with the preparation of our 2021 audited financials as indicated in the earnings release.

Accordingly, the preliminary results, which reflect the most current information available to us, may be subject to adjustments when we file our 10-K, and should not be viewed as a substitute for our full year audit results. With me today are Dermot Smurfit, President and CEO; and Karen Flores, CFO.

Please note that we have provided is our PowerPoint slides that will accompany our prepared remarks. You may access these slides on the Investor Relations section of our website.

I'd like to direct you the second slide of the presentation that we have posted on the IR portion of our website that talks to our forward-looking statement and legal disclosures Along these lines, I'd like to remind our audience today that we may make forward-looking statements on the call under safe harbor and Federal Securities laws, which in each case are qualified by forward-looking disclaimers contained in our earnings release the risk factors, including our SEC filings from time to time, and those statements may or may not come true.

We may also reference non-GAAP financial measures to adjusted EBITDA, which are intended to supplement and not substitute for our comparable GAAP measures. Reconciliation of certain non-GAAP financial measures are provided in appendix or presentation. With that, I'll turn the call over to our CEO, Dermot Smurfit.

Dermot?.

Thank you, Bobby. And good afternoon, everyone. Please join me on the fourth slide of the presentation to discuss our fourth quarter and full year 2021 financial performance and operating segment results encompassing both our B2B enterprise software segment and our international internet gaming segment.

We will also discuss the outlook for the first quarter of 2022, which will deliver positive adjusted EBITDA and will remain EBITDA profitable in each quarter as we progress through the balance of this calendar year.

By way of final major agenda items for this call, we will also discuss new Super RGS clients, Entain and Lottomatica, and our newest platform client, Oaklawn Park in Arkansas as well as our now filed first patent litigation claim to pursue infringers of our patented intellectual property, we call the iBridge framework, which enables omnichannel gambling in America.

Looking back to 2021, our full year revenue increased over 250% to $125 million versus $35 million in 2020.

This was driven by the successful acquisition and subsequent integration of international B2C operator Coolbet, which added a profitable, high-growth international B2C sports betting led business as well as strong execution against our overall strategic plan.

Our domestic B2B division delivered $921 million of gross operator revenue to our B2B clients versus $545 million in 2020 as we are now operational in 9 U.S. states, with an expectation of increasing to a net 10 operational jurisdictions in North America by year-end, including Ontario, Canada, launching next quarter.

We also made great progress on our B2B strategy to acquire a greater and more profitable share of the B2B value chain, including reaching an exclusive online content distribution deal with Ainsworth and acquiring a leading game studio in Silverback, and of course, reaching a milestone deal with Red Rock Resorts to provide our omnichannel technology platform to power their existing retail and online sports betting business with the leading share of the Las Vegas locals market.

Turning on to the next slide, you'll see a review of our key KPIs and metrics for fiscal 2021. Our B2C business remains on a strong growth path, setting numerous performance records in 2021 as it grew 133% from the prior year.

Last quarter, our handle or mount wagered increased 12% from the prior quarter, while our cost per acquisition remains extremely low at just $46 per customer.

While our B2C underlying KPIs were very strong, we did see a volatile sports betting margin on a quarterly basis, more specifically, abnormal sports hold impacted revenue and adjusted EBITDA by approximately $4 million.

This European soccer hold anomaly was experienced by several major public operators with a presence in Europe who reported low hold below historic norms. I'll take the opportunity to note that year-to-date, our hold is tracking in line with normalized levels at roughly 7% and the underlying fundamentals of the business remain on solid ground.

On the B2B side, we saw a 33% increase in annual revenue. In the fourth quarter, the recurring portion of the business increased revenues by 11% from the prior quarter. While the underlying consolidated business performance was strong, the hold volatility caused us to report a loss in quarterly adjusted EBITDA.

This year, our number one focus is on improving our profitability, adjusted EBITDA and margins without hindering our strategic growth initiatives in iGaming Super RGS and of course, GAN Sports. Speaking of iGaming Super RGS, I'm excited to announce two new marquee clients today, the Italian giant Lottomatica are poised to enter the U.S.

gaming market, and Nanette, that's known domestically as the technology provider powering Bet MGM. In the fourth quarter, we acquired Siliverback Gaming for a total consideration of approximately $800,000.

Silverback is a globally recognized game studio, with slot games that are currently distributed across European regulated markets, to more than 100 B2C operators of iGaming. This investment should enable us to scale our proprietary slot content in the coming years on a small targeted investment spend.

Finally, we recently secured a platform deal with Oaklawn Park in Arkansas, which will launch in the second half of this year. Before discussing our 2022 outlook, I want to mention some recent developments related to our intellectual property.

We've obviously seen operators having tremendous success leveraging the land-based patron databases online, which is a technology we have patent protected until 2033, and monetized on multiple occasions for our non-platform clients.

We recently took considered legal action to defend our patented intellectual property to ensure that it remains both protected and monetized. Additional legal action against infringers will be taken as necessary to continue both protecting and monetizing this patented intellectual property.

This is something that we, of course, prefer not to do of long-standing industry participants. But as the situation calls for it, we're certainly not afraid to take legal action. We view these actions as investments that protect our intellectual property assets as we believe for our patented technical capabilities are unique and very much enforceable.

Now jumping to our outlook for the full year of 2022. We are instituting revenue guidance of between $155 million and $165 million. At the midpoint, this implies organic growth of nearly 30% year-over-year. We are also introducing full year adjusted EBITDA guidance for the first time and are forecasting a range of $15 million to $20 million.

As I mentioned earlier, our focus in 2022 is on sustainable profitability and operating leverage. We expect to be adjusted EBITDA positive every quarter and view current guidance as highly achievable. I'd also like to take a couple of minutes to provide our thoughts on the current state of the U.S.

B2B market that is having a short-term impact on our business. While we continue to remain bullish on the mid- to longer-term outlook of the B2B market here in the U.S., there are some well documented near-term headwinds in 2022.

These include firstly, certain B2C operators scaling back their marketing spend; secondarily, market fragmentation has been slower to evolve than we previously expected; and thirdly, our gaming legislation has been slower to be enacted than sports betting legislation.

As a result of these items, we're going to see some pressure on our B2B segment in the near term, with stronger growth forecasted for 2023 and beyond.

In the interim, we'll lean into strong growth we are seeing in B2C and see, of course, controlled B2B growth this year as we're focused on flawless, timely and profitable delivery of new planned launches, with Michigan's fourth client Sorin Eagle Casino poised to launch alongside our major U.S.

operator client launching in Ontario, Canada, early in the second quarter. Our mantra as a leadership team is to control what we can control, and we have implemented several strategic actions to mitigate near-term industry headwinds. Our U.S.

contracts have been structured on a percentage of net gaming revenue so there is a direct correlation with our revenues and what our clients spend in marketing, which is something we can't control.

The first action is that we have now implemented revised contract terms for new deals with minimum revenue guarantees to ensure profitability for GAN on day one, whether our client decides or doesn't decide to market aggressively.

Secondly, as many on the call already know, we've been investing in GAN Sports and iGaming content, which enables a much wider client base along with a much greater share of the value chain. Thirdly, we have a fast-growing and profitable B2C business to help offset some of the current short term challenges in the U.S. B2B market.

Finally, we are taking several measures to accelerate profitability, such as increasingly moving our development efforts to international lower cost locations, reducing our reliance on third-party vendors, and headcount growth will be leveling off as we focus on executing on our existing contracted client pipeline this year.

That said, I want to be very clear that our long-term outlook remains robust. I remain highly confident in our long-term revenue 2026 target of between $500 million and $600 million and margins of over 30% with $225 million in top line revenue next year 2023. Moving on to Slide 6, let me talk about our strategic priorities for fiscal 2022.

Our number one focus this year is squarely on achieving profitable growth. We have completed a thorough review of our cost structure and implemented several measures to accelerate current profitability. Our B2C business is already cash generative and growing, and we see opportunities to expand its geographic reach beyond existing markets.

On the theme of profitability, the B2C business model is CapEx lite. This benefits us as we evaluate potentially entering new international markets as entry will not require a large CapEx commitment given where we are an online-only offering. Finally, U.S. B2B is highly scalable.

And in the near term, we're implementing minimum revenue guarantees in our contract to ensure our operating costs are more than covered regardless of clients' commitments to deploying their marketing capital. Moving on to our investment strategy. We will continue to smartly invest in high ROI opportunities, including GAN Sports and Super RGS.

We will officially go live with GAN Sports next quarter in Mississippi with Island View Resort Casino, and then we expect to launch with Red Rock Resorts in late 2022. We continue to work to sign up major clients to our iGaming Super RGS in addition to the two we announced today.

Both initiatives will allow us to diversify our client base while capturing more of the value chain of the sports and iGaming ecosystem. In addition to those measures, we're implementing initiatives to improve our scalability and drive strong organic growth across the entire business.

B2C is expected to see strong revenue growth in current European and Latin American markets and will be complemented by new exciting opportunities such as Ontario, Canada. In B2B, we will also launch in Ontario next quarter with the technical implementation completed well ahead on the go live date.

In addition, GAN Sports, retail and online will also be launched in the second quarter in Mississippi. We've also secured a deal with Oaklawn Park in Arkansas to provide their sports platform, and there are currently only three licenses in the state, so we expect Oaklawn to have their fair share of sports betting revenue. Moving on to Slide 7.

As you can see here, we continue to add to our iGaming content arsenal with a growing lineup of exclusive Ainsworth content, augmenting our current in-house slot games as Silverback works to develop cutting-edge game titles for broad distribution across all major iGaming markets domestically.

We remain in contract discussions with multiple Tier 1 B2C operators of iGaming, and based on this strong commercial demand, we continue to believe the majority of B2C operators of iGaming here in the U.S. will become clients of our Super RGS over time.

GAN Sports will go live with the Island View Casino Resort in Southern Mississippi in the next quarter. And the team is currently focused on preparing to field trial with Red Rock Resorts in the second half of this year.

Red Rock represents a rare market opportunity, not just to demonstrate our sports capability, but to demonstrate it at considerable scale in Nevada arguably the most complex regulated market environment in America.

The Las Vegas locals market is a $100 million plus existing retail and online sports gaming market, with Red Rock the clear market leader.

There is significant opportunity for GAN Sports to take share, both from winning new business and existing relationships, new partnerships and the general industry replacement cycle for both mobile and retail sports, which is highly favorable economics for GAN. I'll end my prepared remarks on the eighth slide.

We know investors have near-term concerns about the level of B2C operators spend on marketing costs in the U.S., particularly around marquee sports events such as March Madness and Super Bowl. I'd like to remind investors, we are not in the business of expensive marketing to acquire players.

While admittedly, the comparison is not exactly apples-to-apples given geographies. Coolbet, right now, is a profitable, growing B2C business, with a uniquely profitable customer acquisition profile, driven by their operational experience and technology. Further, Coolbet's average cost per player acquisition was just $46 in 2021.

Thus, our marketing spend as a percentage of GGR is less than 20%, which is just one third of that of the U.S. B2C operators.

This is accomplished through cost-efficient marketing, our sports-focused branding that emphasizes unique in-house accumulation, which is actually why we're often cold the last bookmaker as well as sponsorships with local sports teams. Finally, our customers gravitate to the Coolbet brand, which is now internationally recognized and expanding.

Their trademark polar bear mascot is widely visible throughout external advertising as well as a physical events internationally. This helps us easily make ourselves stand out more. Comparing the cost of our Unruly Polar bear to U.S.

operators using celebrity ambassadors or the cost of our local sponsorships in Latin America or Europe versus sponsoring a U.S. sports team is significantly more economical, and this enables us to acquire players cost effectively and profitably.

To conclude my remarks, I'd like to add that I'm more excited now than ever about the prospects for GAN to deliver value for our shareholders. This year, we're focused on delivering accelerated profitability with a laser focus on cost discipline, optimizing overall operations and ROI targets.

Throughout the year, we expect continued robust growth from Coolbet, particularly with the upcoming Soccer World Cup.

In B2B, we expect to see controlled the growth as we expand our reach to new markets and new clients, including the upcoming launch of iGaming for Ainsworth's joint venture with MGM and Lottomatica, of sports betting with the Island View Casino Resort in Southern Mississippi, and of course, the full platform launch for Soaring Eagler in Michigan and Oaklands launch in Arkansas.

And finally, the field trial with Red Rock Resorts in the Silver State of Nevada late in the year. We'll also be expanding into Canada as part of a major expansion to an existing B2B client relationship launching next month.

The outcome of all of this will be accelerating our adjusted EBITDA generation, continued strong revenue growth and maximizing stakeholder value for our investors, employees and clients. With that, I'll pass the discussion to our CFO, Karen Flores.

Karen?.

Thank you, Dermot. And good afternoon. I'll start with a brief housekeeping item. The comparison to the third quarter results give effect to prior period preliminary non-cash adjustments resulting in a reduced capitalization of internally developed software than previously reported as indicated in the preliminary earnings release.

In connection with the completion of our 10-K, the company is currently evaluating the materiality of such adjustments to our prior unaudited quarterly financials and additional disclosures regarding such adjustments will be forthcoming.

In Q4, we observed solid underlying growth trends and execution of our strategy, while temporary headwinds due to low OSB hold impacted our revenue and profit.

Revenue of $30.5 million was up 242% versus prior year, however, down 6% versus Q3, and lower than our expectations, which resulted in the full year coming in at the low end of our guidance of $125 million to $135 million. OSB hold was the main driver of underperformance versus our guidance this quarter.

Revenue would have been $4.2 million higher were it not for lower than forecast OSB hold rates with the flow-through negative impact of $4 million to adjusted EBITDA.

Over the course of 2021, our B2C segment observed a standardized hold of 6.8% in both the first and third quarters, with an increase to 9.7% in Q2 related to favorable results for the house and a decrease to 4.6% in Q4 related to player-friendly event outcomes.

This anomaly not experienced since early 2018 for our B2C segment was also experienced by numerous public operators with a presence in Europe who reported similar hold rates below historic norms. Further details related to the impact of the historical normalized revenue can be found in the appendix of today's presentation.

The low hold presented a significant challenge for the quarter. We continue to be encouraged by the momentum of underlying trends in our B2C segment, which grew active customers and turnover on a strong trajectory in the period. CPA continued to remain well below the peer group, with a slight uptick quarter-over-quarter from $45 in Q3 to $46 in Q4.

Monthly unit customers of 220,000 were up 12% versus Q3 and 145% versus prior year, generating a record handle of $633 million, also up 12% versus Q3 and 116% versus prior year. Overall, Q4 B2C segment revenue of $19.2 million declined 9% versus Q3, and increased 49% versus prior year on a pro forma basis.

Q4 B2B segment revenue of $11.3 million increased 27% versus prior year and 1% versus Q3 as our prior quarter results included $1.5 million in hardware sales in advance of our 2022 new client launches.

The strongest gain in the quarter was made in our B2B recurring SaaS and services revenue, which increased 16% versus Q3 and 144% versus prior year on continued organic growth in existing markets as reflected in the gross operator trend. U.S. real money iGaming SaaS revenue increased 22% versus Q3 and over 100% versus prior year.

Italy was up 1% versus prior quarter and 9% versus prior year, while simulated gaming observed modest declines of 5% versus prior quarter and 6% versus prior year. As a reminder, simulated or social gaming benefited from the COVID stay-at-home dynamic in 2021, and as such, this year will be a difficult comp for our simulated gaming offerings.

Operating expenses were $31 million in Q4, up $3.5 million or 13% versus Q3. This increase was driven by three primary factors. First, our hiring rate in the quarter represented a 9% increase of full-time headcount, and we exited the year at 686 employees.

The related increases in personnel costs in Q4 were partially offset by final adjustments to the 2021 short term incentive comp plan. Second, marketing spend increased primarily as related to our participation in the Global Gaming Expo in October for our B2B business.

And as we continue to invest in B2C marketing programs to build on the momentum we have established and organically growing our international revenues, most notably in anticipation of our upcoming launch in the Ontario regulated market. Third, share based compensation expense increased versus Q3.

While headcount growth is typically the largest driver of this expense, the increase also reflects both the change in the long-term incentive compensation structure where we are now leveraging restricted stock units strategically to foster a broad-based ownership culture and drive long-term retention as well as key management hires and changes made in the period.

We also incurred a $5 million tax benefit quarter-over-quarter as related to a $3.4 million reduction in our income tax provision to a benefit of $200,000 full year. This was largely driven by the release of a valuation allowance on our U.S.

entity in addition to the impact of our full year results and shift of income earned and expenses allocated between the U.S. and foreign jurisdictions. In conclusion, primarily related to the impact of low OSB hold, our adjusted EBITDA loss widened during the period from $800,000 in Q3 to $5 million in Q4.

Due to the tax benefit in period, our net loss improved slightly from $8.6 million in Q3 to $8.5 million in Q4. Moving on to Slide 11, and our full year results.

As I mentioned in my opening remarks, 2021 represented a year of making focused investments and executing our long-term growth strategy with the closing of both the Coolbet and Silverback acquisitions during the year.

We grew revenue over 250% and welcomed over 400 new employees and are now eight global offices, including over 300 employees for our new B2C segment.

While we are pleased with the progress we have made and 2021 was a stake in the ground for where we're heading, we are challenging ourselves this year to refine our execution strategy to align with the current market environment.

I'll elaborate on this momentarily in our full year guidance, but we'd like to take a moment to recap the foundation we've laid.

The integration of Coolbet and scaling of our revenue to $125 million in 2021 has given us clear line of sight into extracting the operational efficiencies and progressive annual margin improvement in 2022 that we spoke about at our recent Investor Day event.

In the last two years, the business has operated at approximately adjusted EBITDA breakeven, with a slight improvement from negative $2.3 million in 2020 to negative $100,000 in 2021.

While our operating expenses grew as driven through acquisitions and investments in technical and operational talent, in corporate infrastructure-related costs, we ended the year with the business sufficiently staffed, which marks a critical turning point for the company.

We gained significant operating leverage in two key categories throughout the year. Our product and technology costs and general and administrative costs declined as a percent of revenue to 17% and 39%, respectively, which combined, were over 100% of revenue in 2020.

Our net income loss expanded from $20.2 million in 2020 to $24.9 million in 2021, given the effect of $11.6 million in purchase accounting amortization for the Coolbet acquisition. We ended the quarter with $39.5 million in cash on our balance sheet.

The decline versus Q3 primarily related to the low hold events and timing of payments related both to the exclusive content rights for the upcoming launch of our Super RGS product offering as well as timing of payments related to our annual corporate insurance program. Moving on to Slide 12, and our full year guidance.

As we look forward to 2022, and as Dermot outlined, the U.S. B2B operating environment remains challenging. And we anticipate a majority of near-term organic revenue growth will come from our B2C segment. Today, we are introducing full year revenue guidance of $155 million to $165 million, which implies 24% to 32% growth from 2021 levels.

We expect B2C revenue to range $105 million to $110 million, representing growth of 34% to 40% versus 2021 and comprising approximately two thirds of total revenue.

Our B2B segment will experience more modest growth while we are scaling our GAN Sports and Super RGS offerings in the near to midterm with an anticipated revenue range of $50 million to $55 million, representing growth of 7% to 17% in 2022. As Dermot noted, we are focused on controlling the controllable and accelerating near-term profitability.

We implemented several measures to take costs out of the business without impacting operations, such as reducing our reliance on third-party vendors and switching some development efforts to lower cost locations with highly skilled talent.

Related to costs, I will also point out that our annual public company costs of approximately $8 million is almost entirely fixed in nature. Lastly, as a reminder, our recurring B2B revenue is highly scalable. And we are still in the early innings of the rollout of the U.S. iGaming OSB market.

Our B2C revenue projection includes the launch of the Ontario-regulated market in the second quarter organic growth in existing territories and a normalized hold rate of 7% throughout the year. I'm pleased to report that we are tracking in accordance with this metric for the Q1 quarter-to-date period.

Our B2B revenue projection includes the launch of a Tier 1 customer in the Ontario market in the second quarter as well as the launches of Soaring Eagler and Island View Casino in Q2 and Red Rock Resorts in Q4.

We have adjusted our forecast to include the recent public statements and shift in strategy by our customer Churchill Downs as well as the recent migration of a B2B client in the Northeast. We have also assumed that simulated gaming will be essentially flat year-over-year, and that we will experience a modest decline in the Italy market.

Regarding our 2022 quarterly revenue cadence, we expect the first two quarters to represent 22% to 25% of revenue each, with Q1 representing the lower end of that range and Q4 representing a higher proportion than observed in 2021.

Correcting for the low hold this past quarter and considering both it's the seasonally highest quarter of revenue and the World Cup event is occurring over the months of November and December. Prior to today, we have not provided guidance for adjusted EBITDA.

We are introducing this metric now to provide more transparency into what we are focused on, and how we are progressing towards improved economics.

This year, we expect our adjusted EBITDA to be between $15 million to $20 million, which includes modest headcount growth of 7% for the entire year, including our investments in GAN Sports and Super RGS as well as the full year effect of content fees related to the exclusive licensing arrangements for Super RGS.

With the impact of investments we made in 2021, combined with the continued revenue growth, we are able to achieve with our newly scaled infrastructure we expect that approximately 50% of the incremental revenue will flow through to adjusted EBITDA in the year ahead. Let me repeat that, 40% of incremental revenue will flow through to adjusted EBITDA.

From a quarterly perspective, for 2022, we expect our adjusted EBITDA in Q1 to be between $2 million and $3 million. Our adjusted EBITDA will build throughout the year, with the inflection in Q4 aligning with the traditional seasonality and World Cup finals. We are also targeting to be net income and free cash flow positive by Q4.

Our bridge from adjusted EBITDA to net income will shift slightly in 2022 as we anticipate increases in D&A, share-based compensation and income tax. We are actively evaluating our capital structure, and we'll be taking steps to ensure that we retain flexibility as we move forward through the year towards increased profitability.

We view our stock as undervalued at these levels. We had planned to repurchase stock this quarter, but the $4 million hold impact to our results delayed this plan. We are currently evaluating raising a small amount of debt capital to both accelerate our B2B investments and repurchase shares. Wrapping up on Slide 13.

While we aren't pleased with the fourth quarter results, the underlying performance of both B2B and B2C was strong in the quarter, with the hold anomaly impacting our consolidated results. Our 2022 outlook implies 28% revenue growth at the midpoint and $15 million to $20 million in adjusted EBITDA.

We expect to be adjusted EBITDA positive in every quarter this year, driven by our profitable B2C business, scaling our B2B business that is largely recurring, and cost controls we are implementing throughout the company.

Our focus for 2022 is squarely execution and cost control to drive near term profitability while strategically investing in GAN Sports and Super RGS. I'll now turn the line over to the operator to open it up for questions. Hector, back to you..

Hi. Good afternoon. Thanks for taking my question. Just wanted to dig into the B2B guide. I feel like that's where some of the confusion is.

Can you just kind of help us think why you're assuming little positive impact from Super RGS and GAN Sports? I guess, probably more so on the Super RGS, I would have thought that you should be able to kind of plug into other systems. And then if your content is strong, you'll be able to recognize those revenues.

And then the second part of that is, as we look to 2023, Dermot, I think you confirm the 2026, but I didn't know if you were willing to confirm the 2023 outlook that you issued at the Investor Day? Thanks..

Yeah. I'm happy to confirm that now. $225 million in top line revenue in 2023 is -- or more is what we see as of right now per the narrative earlier on. As to Super RGS, Super RGS for major operator clients such as those announced today will kick in, in the second quarter, but they're going to ramp throughout the year.

Hence, the relatively conservative view on the Super RGS contribution throughout the totality of 2022. It does take time to do these deals, Chad. It takes about six months to do the contract. It takes about three to four months to do the technical integration. Typically, those processes take place in the exact same time frame.

And in fact, many times, the contract is the very last item before any announcements are made. So the technical integration with -- for Entain, for example is all done and awaiting submission. So it is a relatively well-understood industrial cycle that is like a game of tennis played over a multi-month period..

Okay. Thank you. And then on the patent filing suit -- well, I guess more importantly, are you assuming anything in terms of patent fee contributions in your 2022 guide? And related to the suit, I'm guessing this will be a long drawn out process. But like you said, it kind of raises awareness to maybe others better infringing your patents.

Is that kind of the way to think about it in the near term?.

Yeah. I mean there is -- our guidance already takes into account the anticipated very modest costs associated with the legal actions taken, Chad. And we don't assume any patent revenues in 2022 or 2023.

So we are -- in the NVIDIA's position of having to take these very specific legal steps to bring the parties to the table in order to seek and obtain fair and appropriate compensation for the use of our patented intellectual property. It's -- beyond that, it's not really appropriate to comment..

Okay. Thanks, Dermot. I’ll jump back in the queue. Appreciate it. .

Our next question comes from David Bain with B. Riley. Please proceed with your question..

Great. Thank you. First, maybe if we could just take a step back for a second and just look forward sort of just the U.S. online market liberalization potential large ones even like California.

Part of our thesis has been seeing more of an open online market model, promoting kind of the licensing of mid-level market candidates like Tribes, those kind of operators, or the other side of the coin would be more like the New York model.

And I'm just kind of wondering, as you look at your long-term guide, how you sort of contemplate the future?.

Yeah. David, we're aligned with your thesis in that we see several more Native American states coming online, no pun intended, over the course of the next few years. Certainly look at California as a major opportunity for GAN, GAN technology and what I call the complete enterprise solution, B2B to power the tribes as they move online.

I think and hope, and I think this would be consistent with the industry review, the New York process appeared to have significant political influences at play and political characters influencing. And I would hope we don't see many more repeats of the New York legislative and taxation environment.

That said, we have our first Native American client going live in Michigan in a few weeks' time, very excited to bring our fourth client live, and that gives us a very real credible chip in the game for being a major B2B provided to other native American tribes as these tribal gaming states come online..

Okay. Great. And just maybe a follow-up, another big kind of picture question and a follow-up on what Chad asked with Super RGS. If we look at Ainsworth Silverback incredible tech, I mean you have a lot of exclusive content.

And post the customer acquisition that we anticipate, how do you manage the process of where that fits within the B2C offerings to make it closer to lobby or closer to having more eyeballs on it.

Can you help us understand that process a bit? Is it making the operator aware of kind of the land-based market share or other kind of statistics? Or is it relationship-oriented? How do we work that back end once you get the customer?.

Yeah. So on the B2B side, for example, some clients that are launching imminently. They're using our product and marketing services that we are effectively in control of the virtual gaming floor and where these games are located visibly.

The phraseology top deck of the online casino is incredibly important for customer engagement and revenue generation. And in those instances, we are in control of that and take appropriate actions to highlight the Ainsworth slot content and over time in Silverback gaming content.

In other instances, it will be the BBB clients' marketing team that will make their decisions about exactly where games are located in the virtual gaming floor.

But of course, we've got many ways of influencing that as the underlying platform provider, whether it's having associated leaderboard tournaments specific to Ainsworth's slots or having other bonus promotions specifically crafted to promote engagement and play Ainsworth slots.

And we've certainly seen then outperform the average in Michigan, where they've been active in the Super RGS since the very end of November last year..

Okay. Awesome. And I'm just going to go over on one and that's Churchill exiting the market.

I mean based on the comments by both yourself and Karen, can I assume that -- or can we assume that it wasn't overly material, or are their mitigating factors for recovery there?.

Yeah. Well, David, I mean, announcing an exit is very different to actually exiting. This thing will continue on in the vast majority of the states for an -- as I believe the various different market access deals are provided to third parties to evaluate.

We're in discussions with some of those third parties that we'll be picking up and hopefully continuing the operations for new B2B clients yet to be determined. But last year is 3% of our revenues, relatively modest for us, and we have contractual financial downside protection in the situation.

But I'm not going to show [ph] from the disappointment we feel that Churchill, which is a fantastic retail-oriented enterprises, exiting the space, at least for now..

Right. Okay. Okay, great. Thanks, guys. .

[Operator Instructions] Our next question comes from David Katz with Jefferies. Please proceed with your question..

Hi. This is Cassandra asking on behalf of David. Thank you for taking my question. Churchill Downs has indicated that the unit economic is simply not profitable for them to kind of continue this operations. And even when marketing spend seems to be normalizing there remains concerns that whether there are enough room for the smaller operators in U.S.

sports betting, iGaming.

Just want to get your take on that assumption?.

Well, I'll take that, Cassandra, to perspective that in markets that offer iGaming, and I think there is relatively fair industrial perspective that over time, iGaming legislation will continue to roll out, however, in a relatively unpredictable fashion.

So states like Illinois and Indiana and others, who already have online sports betting, will add iGaming over time.

In the market environment, we have online sports betting, retail sports betting and iGaming, there will be significant opportunities for even the smallest suppliers to drive profits from an online business, just as we see in other jurisdictions in Europe and beyond.

So I think really the question also about how quickly does iGaming legislation get implemented. That will drive fragmentation of market share, and that will ultimately foster a greatly expanded universe of potential B2B clients for GAN. And I'd like to characterize the B2B opportunity here in the U.S.

as deferred and somewhat delayed as opposed to materially impacted at a fundamental level.

And iGaming legislation will continue here in the U.S., and it will be a very, very substantial TAM over the course of the next few years, and we built this for the long term and transition the business to positive EBITDA in order to ensure that we are financially healthy and structured for success will be on a longer term basis..

Got it. Thank you for taking my question. .

Thank you. .

Our next question comes from Ryan Sigdahl with Craig Hallum Capital Group. Please proceed with your question..

Good afternoon. Two questions and the first one does piggyback off of the one that was just asked.

So I guess what do you see in future states that's different than current states? Because many current states have online sports betting, retail sports betting, and iGaming, and you have the likes of Churchill Downs, which, as you said, is a very reputable known commodity win as well materially reducing spend, not exiting that yet.

But I guess why the small operators are? Why do you think fragmentation will be better in future states versus existing states that have all two of those?.

Well, Ryan, we have the unique advantage of the actual operating data in the states like Michigan. And I hold out Michigan as the perfect example of how to get it all right in one go. New Jersey, Michigan share some common traits.

You've got iGaming and online sports betting and retail sports betting in Michigan state where you got both commercial casino operators and tribal gaming operators. So we know that in Michigan, relatively quickly, clients have been consistently able to generate cash -- positive cash flow from their online operations.

The vast majority of that is centered around their online casino activities.

So Michigan is a great model for if that legislative framework gets reimplemented, load tax, trialing commercial casino operators, you get a significant opportunity for GAN, and we're about to launch our fourth clients out of the 15 total operators that will ever be online in that state..

Maybe I don't have the -- I thought the top, I don't know, 5 or 6 operators in Michigan had 90% plus of the market share, which kind of counteracts the fragmented nature of what you're saying?.

I think, Ryan, your question was about the ability of our clients to generate profits in these markets, which obviously induce them to enter the market in the first place..

No, it was on the fragmentation comment. I believe that consolidation will happen amongst the largest players, not fragmentation to the lower ones, which we're seeing that happen. But anyway, we can take that off-line.

Curious for my second question, so does the Super RGS deal with Ainsworth, does that also include MGM?.

It's specifically for delivery onto the MGM online product offerings here in the U.S..

Great. Thank you. Good luck, guys. .

Thank you, sir. .

Our next question comes from the line of Greg Gibas with Northland Securities. Please proceed with your question..

Hey, thanks for takin the question.

Wondering if you could just discuss Coolbet's market share trends in both Europe and South America?.

Yeah. Greg, we've seen the Latin American market share trend expand very much in line with the overall market, but they are podium players in a selective number of Latin American markets at the moment. In Europe, Europe is slightly more challenging. I think they're maintaining their market share as opposed to greatly or rapidly increasing it..

Okay. Great. And then as a follow-up, Karen, I think that you were saying EBITDA is kind of going to build throughout the year.

Does that imply sequentially ramping quarters on the adjusted EBITDA front?.

Yeah. I mean I think, in general, it will -- the ramp will follow the revenue trends that I outlined. So that increasing 22% to 25% of revenue.

So kind of building in the first 3 quarters, but there is a back-loaded effect in the fourth quarter, again, just because of the seasonally high period, but we also have the World Cup that we're looking forward, too..

Okay, got it. Thank you..

Ladies and gentlemen, we have reached the end of the question-and-answer session. And I would like to turn the call back to Mr. Dermot Smurfit, CEO for closing remarks..

Thank you for joining today for our fourth quarter and full year 2021 earnings. While there are some short-term industry challenges in our B2B business, I'm confident we're taking strategic steps to mitigate these and continue to grow this segment.

In addition, we have a fast-growing profitable B2C segment that continues to follow a strong growth path, we've now transitioned the business to generating positive EBITDA in the current first quarter and 2022 will be a full year of continued profitable execution as we launch GAN Sports in the U.S.

into Ontario, and grow our Super RGS business while in conjunction taking cost out of our business without impacting strategic growth initiatives. I do look forward to updating you all on our progress throughout the balance of the year. Thank you all again..

This concludes today's conference. You may disconnect your lines at this time. Thank you all for your participation..